At IBC, manufacturers report that business is improving

In virtually every exhibit stand and press conference, broadcast equipment manufacturers reported that business is slowly improving, after three quarters of flat or declining profits, as broadcasters continue their migration to high-definition operations. Some said revenues are “growing nicely.”

At the IBC Show, attendance was slightly up (about 4 percent) from last year’s numbers — officially 50,462 came this year, compared to 48,521 in 2010 — but those that came were in serious negotiations to buy gear they apparently had put off buying for the past two years.

“We are delighted with this year’s strong visitor numbers,” said IBC chief executive officer Michael Crimp. “They are a very clear indication of the resilience and optimism of our industry despite the current economic climate.”

Peter White, Director General of the International Association of Broadcast Manufacturers (IABM), said about 65 percent of the member companies in his organization have reported a profit in the past two quarters. Those members include Avid, Axon, EVS, Grass Valley, Harmonic, Harris, Miranda, Nevion, Quantel, Snell, Sony and Vitec Group.

The IABM’s latest research shows that while business is steadily growing, there is a real pressure on margins. Basically, companies are making less for the same equipment they’ve been selling for the past three years.

“It’s about meeting new customer needs,” he said. “The new needs are quite different, post recession, than they were going into the recession [roughly 2009]. Customers are very concerned with price, cost of ownership, interoperability and saving money by using new technologies. Our members have to be sensitive to that if they want to remain in business.“

White said the more proactive broadcast vendors that focus on customer needs will continue to make money. He also said industry consolidation would continue to occur as larger companies look to get into new media areas in the fastest way possible. (At the IBC Show, Adobe Systems bought color grading technology provider IRIDAS and Jampro Antennas, Inc. agreed to purchase the Alan Dick Broadcast Division and its terrestrial RF-related product line from ADC UK Ltd.).

The IABM’s latest “Global Market Evaluation Report” is available for purchase or free to IABM members and shows: 2009 was a very bad year (revenues were down 30 percent over 2008); 2010 was slightly better (up 6 percent); this year looks to be even better [up 15 percent], and with next year’s U.S. elections, the London Olympics and other major sporting events occurring around world, IABM members predict they will be back to 2008 levels by the end of 2015.

“It took us four full years to get back to where we were before the recession,” White said, “and now we expect general continued growth.”

Going forward, product categories like signal processing, format conversion and storage hold the most promise (predicted to grow 50 percent by 2015). Tape-based production equipment and services surrounding outsourcing are deemed in most need of a facelift. The IABM predicts that the entire industry will have an overall value of about $30 billion by 2015. It’s currently valued at around $25 billion.

On the show floor, there was lots of enthusiasm, and a bit of anticipation that the economy is getting better and broadcasters in the U.S. and around the world are beginning to spend money again.

Ross Video, based in Canada, continues to have a run of profitable quarters, according to company president David Ross, who said his company is now building new facilities with “three times the manufacturing and administrative space.” At the show, Ross introduced a number of new products, including a new 1 M/E (1RU) panel with 16 to 24 inputs. There’s also a new web-based, multi-user GUI, desktop control and an iPad app.

“We’re busy and doing great,” Ross said. “We hear a lot of stories about companies not making money, but that’s not what we’re seeing.”

AJA Video, based in California, seems to agree.

“August [2011] was our best month ever,” said Nick Rashby, president of AJA Video, adding he has seen strong growth (20-30 percent) over the past two years. At the show, the company introduced a variety of new conversion products and Io XT, its first Thunderbolt-enabled professional video I/O device.

“We’ve remained profitable because we stay focused and stick to what we do well,” Rashby said. “I think companies that understand who their customer is and don’t try to grow just for the sake of shareholders or upper management, are the ones that stay successful in his business.”

T-VIPS, a Norwegian company that makes video-over-IP products, also reported significant growth in the past year. At the show, T-VIPS launched a number of products, including a new TSoIP Switch and an MPEG-4 Contribution Encoder and Decoder.

“We have enjoyed steady growth as IP becomes more mature in people’s eyes,” Espen Myhre, vice president of sales for the Asia Pacific region, said. “I would say we are in a good position with a product line that addresses the needs of content providers moving to OTT and multi-screen strategies.”

Of course, not everyone is as fortunate. Sony has gone through a very challenging year, due to the effects of the earthquake and tsunami that wiped out two of its tape manufacturing facilities in the north of Japan. At the Sony IBC 2011 press conference, the company touched briefly on the subject and said that production of its HDCAM-SR tape, which is made in Sendai, Japan, had resumed this summer.

Due to this and other competitive challenges, it was said that the head of the Sony in the U.S., Sir Howard Stringer, recently told a different audience that Sony had been “flooded, hacked and singed” in the past year.

During the IBC show, the IABM hosted a panel discussion about the state of the business. The panel, moderated by Adrian Scott, an industry analyst with Media Asset Capital, included the heads of Grass Valley, Harmonic, Harris, Miranda Technologies and Pixelmetrix.

Virtually every executive said they saw new opportunities in emerging third world markets (India, China and Latin America).

“The positive trends are coming from these emerging markets,” said Alain Andreoli, president/CEO of Grass Valley, adding that he has shifted Grass Valley’s focus from the Europe and North American markets to China and else wherever new development is occurring.

At the show, Grass Valley introduced several new products (including a new production switcher, Karerra, and a media services platform called STRATUS) and Andreoli said he remains optimistic. He even challenged the IABM’s industry valuation, emphatically stating that the number should be higher than $25 billion.

“I do feel that we sometimes need to switch off the TV and radio news and escape from stories that seem to say everything is crisis and chaos,” Andreoli said.

“Most companies go through ups and downs in their life cycles, so it’s all a matter of timing,” IABM’s White said.

Discussing the topic with many vendors on the exhibit floor, the time for celebrating is not here yet, but revenue improvement across the board appears to be on the horizon.